Bangladesh has long promoted itself as an attractive destination for foreign direct investment (FDI). The country offers a large domestic market, a young workforce, and steady economic growth over the past two decades. On paper, the legal framework is also welcoming. The Foreign Private Investment (Promotion and Protection) Act, 1980 guarantees protection for foreign investors and allows full repatriation of profits and capital. Yet despite these assurances, global investors frequently report that moving money into, and especially out of Bangladesh remains far more difficult than the law suggests.
The challenge lies not in the legal principles but in the banking procedures and bureaucratic processes that govern foreign exchange transactions.
Most foreign investment flows through authorised dealer (AD) banks under the Foreign Exchange Regulation Act and Bangladesh Bank’s Guidelines for Foreign Exchange Transactions (GFET). In theory, post-tax dividends and profits can be repatriated without prior approval from the central bank. In practice, however, investors must navigate multiple layers of documentation before any funds leave the country.
Banks commonly require audited financial statements, board resolutions declaring dividends, tax clearance certificates, proof of investment registration with the Bangladesh Investment Development Authority (BIDA), and various foreign exchange forms. Even when these documents are provided, banks often seek additional comfort from Bangladesh Bank before processing remittances. This creates delays that can stretch from weeks to months. In addition each bank has a separate list of documentation in addition to the ones sought by Bangladesh Bank, making foreign investors more confused about dealing with local banks with their uneven standards.
Large remittances attract even closer scrutiny. Transactions above certain thresholds are frequently subject to additional review, and banks tend to adopt a cautious approach to avoid regulatory risk. The result is a system where approvals may technically be unnecessary but are informally expected. Complex KYC, AML, CFT reporting requirements have continued to discourage private equity and venture capital investors for years making the start up scene in Bangladesh dismal beyond words. Start ups get tangled up in the “paying salaries and compliance game” all while worrying about the next round of funding and inconsistent tax policy implications surrounding their industry.
Foreign exchange shortages in the banking system have further complicated matters in recent years. When dollar liquidity tightens, banks prioritise essential imports such as fuel and food, leaving dividend remittances and other investor payments waiting in the queue. For multinational companies, the uncertainty surrounding when profits can be transferred back to headquarters raises legitimate concerns about financial planning and capital allocation.
Tax policy also plays a role. Bangladesh’s corporate tax rates at 27.5% remain higher than those in several competing investment destinations in Asia like Vietnam or India. On top of this, cross-border payments; such as royalties, technical service fees, management charges, and interest payments are subject to withholding taxes which are rather tax exempted in many other destinations. Although double taxation avoidance agreements exist with many countries, investors often encounter inconsistent application of treaty benefits or additional documentation requirements.
Beyond the financial regulations themselves lies another hurdle: institutional fragmentation. Foreign investors must regularly engage with multiple agencies, including BIDA, Bangladesh Bank, the National Board of Revenue (NBR), and the Registrar of Joint Stock Companies. Many documents submitted to one authority must be resubmitted to another, creating duplication and administrative delays.
The exit process for investors can be equally cumbersome. Share transfers involving foreign shareholders typically require valuation reports and regulatory reporting to ensure arm’s-length pricing before capital gains can be repatriated. Transfer pricing policies amongst the “big 4” auditors often clash with the NBR. These procedures, while intended to maintain financial integrity, add further complexity to investment exits.
None of these obstacles are insurmountable. Bangladesh has already made progress through digital services and one-stop investment initiatives. But if the country wants to compete more effectively with regional peers such as Vietnam or India, further reforms are needed.
Simplifying banking procedures, ensuring predictable foreign exchange access, and streamlining inter-agency approvals would send a powerful signal to global investors. Capital controls beyond a certain point has indirectly caused many to take money out of the banking system via “hundi” and has eluded the very notion of transparency that the banking channel aims to achieve.
A simple suggestion would be to allow individuals/ companies who pay a higher amount of tax to spend or remit more than the $12,000 legally depending on their tax bracket. The higher the tax paid, the more those individuals/ companies should be allowed to spend legally.
In an age where nearby ASEAN counties have lower taxes, lower capital controls and easier access to bring in FDI all while providing a better quality of life to expats it begs the question why the fundamentals are still not being fixed to attract far more FDI. “Soft loans” are no longer going to cut it. Infrastructure development based on loans eventually lead to money printing and inflation in the long term, with the added cost being shared between the citizens, regardless of whether they use those services or not. The challenge now is ensuring that the systems designed to regulate investment do not unintentionally discourage it.
